CFPB Says Student Loan Servicers Leave Military Service Members in the Lurch

NEW YORK (MainStreet) — U.S. military personnel with student loans continue to suffer at the hands of their loan servicers, who botch payment processing and erroneously put loans into collection, according to a report released on Tuesday by the Consumer Financial Protection Bureau.

"Overseas & Underserved: Student Loan Servicing and the Cost to Our Men and Women in Uniform” highlights the servicers’ continued mistakes, resulting in improper denials of legal benefits and shoddy follow-through on protections for military families.

Complaints include the disgust and outrage expressed by grieving parents seeking to discharge a co-signed student loan following the death of their child in the line of duty.

There are already federal laws on the books that give GIs protection from student loan debt. The Servicemembers Civil Relief Act (SCRA) includes special loan deferment options, such as the Department of Defense Student Loan Repayment Programs and loan forgiveness on certain federal loans through public service occupations.Smelling a business opportunity, the CFPB said some private student lenders advertise pay-for-play services that offer loan discharges, military loan deferments, and other protections for military families. This advice and information is available from the U.S. government free of charge.

Veterans often sustain wounds that are so severe that they qualify for loan discharge. Mark Kantrowitz, senior vice president and publisher of Edvisors.com, said, “Complaints concerning the difficulties in qualifying for a total and permanent disability loan discharge are not limited to servicemembers.” The CFPB’s student loan ombudsman Seth Frotman described the loan servicing problems faced by enlisted personnel as “the canary in the coal mine” that heralds problems in the broader civilian student loan market.

Kantrowitz recommends that servicemembers file student loan paperwork with Nelnet, which runs the website www.disabilitydishcharge.com for the federal government, rather than with the loan servicer.